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The townsite of Walpole is located on the south coast, 423 kilometres south southeast of Perth and 66 kilometres west of Denmark. It derives its name from Walpole Inlet, being located on the shore of the inlet. Walpole Inlet takes its name from the river flowing into it discovered by Captain Thomas Bannister in 1831, and named by Governor Stirling after Captain W Walpole with whom he served on the "Warspite" in 1808.
In 1910 the government set aside land in the Walpole area as a national park, and in the following years and in the 1920s the area became a popular tourist destination. In 1929 the railway line reached Nornalup, 13 kilometres east of Walpole, and in 1930 the Nornalup Reserves Board proposed the development of an area for small suburban lots for holiday cottages on Nornalup Inlet. A site was selected for a townsite in 1932 and lots surveyed in 1933. When the townsite was gazetted in 1933 the name Walpole was preferred, but it was named Nornalup, as it was believed the name Walpole had already been used in Tasmania. Confusion soon arose, as the name Nornalup related more to the railway terminus 13 km east on the Frankland River. A number of renaming options were considered before the Post Office confirmed that there wasn't a Walpole in Tasmania, and so in 1934 Nornalup was renamed Walpole.